As Greece seeks more help, Ireland and Portugal press ahead

Tax office workers protest the government's austerity measures outside the Portuguese parliament building in Lisbon. As a bailout for Ireland looks increasingly likely, many analysts say Portugal could be next in line. (Armando Franca/AP)

As Greece appeals for more time to meet conditions for international aid, the country’s political fumbling and economic failures are being judged, at least in part, against the performance of other struggling European governments.

The euro zone’s other two crisis countries, Ireland and Portugal, have adhered closely to the promises made in their rescue programs and seen flickers of life return to their economies.

In Ireland’s case that has meant a jump in employment late last year, a smidgen of new growth, and success in persuading global investors to buy several billion dollars of long-term government bonds in July. Portugal has not done as well, but its exports are growing, budget targets are being met, and growth is expected to resume next year.

That progress stands in contrast to Greece, which has negotiated two rescue programs with Europe and the International Monetary Fund in as many years and is now appealing to lenders for yet another chance to make good on promised concessions. The debate could prove critical to the survival of the euro currency union in its present form, and in a sense boils down to a comparative judgment: Are Greece’s problems so different and so much worse that it legitimately needs more time to fix itself? Or is it simply unwilling to do the heavy lifting accomplished by politicians in Ireland and Portugal?

“From a purely political dynamic, governments that are reluctant to give more money to Greece have a justification in Ireland and Portugal,” said Marie Diron, an Ernst and Young economist who follows the euro zone. Both Ireland and Portugal aim to end their three-year rescue programs on schedule and begin standing on their own again.

Greek Prime Minister Antonis Samaras opened talks Friday in Berlin with German Chancellor Angela Merkel, seeking perhaps an extra two years for Greece to meet spending and other targets accepted by previous Greek leaders less than six months ago. Greece’s combative politics have delayed progress. Other European nations again confront a choice of giving Greece extra help or leaving the nation stranded without the means to pay its lenders, employees and pensioners. That could force Greece to exit the euro zone.

After nearly three years of negotiating over the country’s troubles, patience is thin.

The rescue program negotiated last spring “went to the limits of what is economically feasible,” German Finance Minister Wolfgang Schaeuble said Thursday on German radio, according to wire service reports from the country. “More time means more money.”

Greece is considered the most likely candidate to leave the currency union. Ireland, by contrast, is a study in how an open economy and effective trade strategy can help a country take advantage of the euro’s strengths. Portugal is somewhere in the middle, perhaps destined to muddle through with slow growth.

Studies have found that Greece is hobbled by extremely weak administration. The government is unable to collect taxes or enforce laws, and bringing it up to par could take years. So much of the economy is in state hands that measures meant to control public deficits have exacted a heavy toll in employment and income with little offsetting benefit. Greek exports are comparatively small and thus offer little immediate hope of driving the economy. The banking system, through little fault of its own, is broke.

Greece remains far from the point where citizens and politicians can expect a return from the sacrifices they are making.

“When you impose deflation on an economy that cannot benefit because it is not that open to world markets, you just create more deflation,” said Carlo Bastasin, an Italian economist and analyst at the Brookings Institution.

Ireland and Portugal arguably had relative strengths that have made their tasks easier — particularly Ireland. Ireland’s trade ties with the United States, for example, provided support as the U.S. economy continued growing while Europe foundered. Ireland’s exports, open investment environment and strong tech sector also have continued to attract foreign investment, particularly as wages have dropped.

But many of the same sorts of measures called for in Greece were demanded of Ireland and Portugal: spending cuts that hacked into social programs, the sale of state assets, changes to long-standing labor protections, and a host of efforts intended to push down living standards to make the country more competitive.

In both cases, political leaders followed through, largely met the goals outlined by the IMF, and kept even, at least, with the tidal forces that have pushed the euro zone toward recession.

In its most recent reviews of the Portuguese and Irish economies, the IMF said that although neither country’s success is assured, the major risks involve issues that are increasingly out of their control.

Portugal, for example, needs Spain to succeed, because its much larger neighbor accounts for more than 20 percent of its exports. Both Ireland and Portugal need the euro zone as a whole to rekindle faith that it can remain intact. Investing, lending and spending patterns won’t return to normal in the region until that is assured.